Last Updated on June 28, 2021 by LawEuro
German Civil Code (BGB) German law
Title 20
Suretyship
Section 765
Typical contractual duties in suretyship
(1) By a contract of suretyship the surety puts himself under a duty to the creditor of a third party to be responsible for discharging that third party’s obligation.
(2) Suretyship may also be assumed for a future or contingent obligation.
Section 766
Written form of the declaration of suretyship
For the contract of suretyship to be valid, the declaration of suretyship must be issued in writing. The declaration of suretyship may not be made in electronic form. If the surety discharges the main obligation, the defect of form is remedied.
Section 767
Extent of the suretyship debt
(1) The currently applicable amount of the main obligation determines the duty of the surety. This applies in particular, without limitation, if the main obligation has been changed through no fault of or default by the principal debtor. The duty of the surety is not extended by a legal transaction that the principal debtor undertakes after assumption of the suretyship.
(2) The surety is liable for the costs of termination and prosecution of rights that are reimbursable by the principal debtor to the creditor.
Section 768
Defences of surety
(1) The surety may assert the defences to which the principal debtor is entitled. If the principal debtor dies, then the surety may not invoke the fact that the heir has only limited liability for the obligation.
(2) The surety is not deprived of a defence by the fact that the principal debtor waives it.
Section 769
Co-suretyship
Where more than one person enters a suretyship commitment for the same obligation, they are jointly and severally liable even if they do not assume suretyship jointly.
Section 770
Defences of voidability and set-off
(1) The surety may refuse to satisfy the creditor as long as the principal debtor is entitled to avoid the legal transaction on which the obligation is based.
(2) The surety has the same authority as long as the creditor can obtain satisfaction by set-off against a claim of the principal debtor that is due.
Section 771
Defence of unexhausted remedies
The surety may refuse to satisfy the creditor as long as the creditor has not attempted without success to obtain execution of judgment against the principal debtor (defence of unexhausted remedies). If the surety raises the defence of unexhausted remedies, the limitation of the claim of the creditor against the surety is suspended until the creditor has attempted without success to obtain execution of judgment against the principal debtor.
Section 772
Duty of creditor of enforcement and realisation
(1) If the suretyship applies to a monetary claim, then enforcement of judgment must be attempted against the movable things of the principal debtor at his residence and, if the principal debtor has a business establishment in another locality, at the latter as well, and, in the absence of a residence and a business establishment, at his place of abode.
(2) If the creditor has a pledge over or right of retention to a movable thing of the principal debtor, then he must attempt to satisfy his claim from this thing too. If the creditor has such a right to the thing for another claim as well, then this only applies if both claims are covered by the value of the thing.
Section 773
Exclusion of defence of unexhausted remedies
(1) The defence of unexhausted remedies is excluded:
1. if the surety waives the defence, including without limitation if he has assumed suretyship as principal debtor,
2. if pursuit of rights against the principal debtor is made appreciably more difficult due to a change of residence, of business establishment or of place of abode occurring after assumption of suretyship,
3. if insolvency proceedings have been opened in relation to the assets of the principal debtor,
4. if it must be assumed that enforcement of judgment against the assets of the principal debtor will not result in satisfaction of the claim of the creditor.
(2) In the cases cited in nos. 3 and 4, the defence is admissible to the extent that the creditor may satisfy his claim out of a movable thing of the principal debtor over which he has a security right or of which he has a right of retention; the provisions of section 772 (2) sentence 2 apply.
Section 774
Statutory passing of claims
(1) To the extent that the surety satisfies the claims of the creditor, the claim of the creditor against the principal debtor passes to him. The passing of ownership may not be asserted to the disadvantage of the creditor. Objections by the principal debtor under a legal relationship existing between himself and the surety are unaffected.
(2) Co-sureties are only liable to each other under section 426.
Section 775
Claim to release of the surety
(1) If the surety has provided suretyship on the instructions of the principal debtor, or if he is entitled under the provisions on agency without specific authorisation, as a result of assuming the suretyship, to the rights of a voluntary agent against the principal debtor, then he may demand that the principal debtor releases him from the suretyship
1. if the financial situation of the principal debtor has substantially deteriorated,
2. if pursuit of rights against the principal debtor is made appreciably more difficult due to a change of residence, of business establishment or of place of abode occurring after assumption of suretyship,
3. if the principal debtor is in default of discharging his obligation,
4. if the creditor has obtained an enforceable judgment for discharge against the surety.
(2) If the main obligation has not yet fallen due, then the principal debtor may provide security to the surety instead of releasing him.
Section 776
Waiver of a security
If the creditor waives a preferential right connected with the claim, a mortgage or ship mortgage, a pledge existing for the claim or a right against a co-surety, then the surety is released to the extent that he would have been able to obtain compensation under section 774 from the right waived. This also applies if the right waived only arose after assumption of the suretyship.
Section 777
Temporary suretyship
(1) If the surety has provided suretyship for an existing obligation for a specified period of time, then at the end of the specified period of time he is released, unless the creditor effects collection of the claim without undue delay under the provisions of section 772, continues the proceedings without any substantial delay and without undue delay after the end of the proceedings notifies the surety that he is claiming payment from him. If the surety is not entitled to the defence of unexhausted remedies, then he is released at the end of a specified period of time, unless the creditor makes this notification to him without undue delay.
(2) If notification has been made in good time, then the liability of the surety in the case of subsection (1) sentence 1 is limited to the scope the main obligation has at the time when the proceedings ended, or in the case cited in subsection (1) sentence 2 to the scope the main obligation has at the end of the specified period of time.
Section 778
Credit mandate
A person who instructs another person to grant a third party a loan or financing assistance in his own name and for his own account is liable as surety to the mandatary for the obligation of the third party arising from the loan or the financing assistance.
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